Google accused of tax avoidance in the UK

Monday 20 April 2009 | By Heidi Scott, Gosh! Media Copywriter

Search giant Google has left HM Revenue & Customs searching for its tax payments as it joins the growing list of companies facing criticism over UK tax avoidance. Public accounts showed that Google had paid a mere £600,000 in UK corporation tax, despite local revenues in excess of £1.25 billion.

Pundits reckon the firm should have faced taxes of more than £100 million in the UK but these were avoided by channelling its revenues through the Irish Republic, where corporation tax is levied at only 12.5%, compared with 28% in Britain.

Newspaper investigations suggest that Google avoided a further €135 million (£119 million today) in tax from Ireland during 2007 while the Irish subsidiary was owned by one of two companies that Google set up in the tax haven of Bermuda. Furthermore, records suggest that several sets of Google's UK accounts were filed late, with one set outstanding by more than five months.

Google's actions were roundly condemned by politicians. Vince Cable, Deputy Leader of the Liberal Democrats, led the criticism, saying, "Google seems to be one of a number of companies that are based here, have UK employees and use local services and infrastructure but try to pay their taxes elsewhere when they think they can get away with paying less tax. The government needs to be much firmer in stopping it. The reality is," he continued, "the more tax that companies like Google avoid, the more the tax burden falls on the rest of the public. It is clear that while Labour and the Tories have been embracing Google as the paragon of a 21st-century company, it has been running away from the taxman."

Austin Mitchell, the Labour MP who has long campaigned against corporate tax avoidance, described the diversion of UK revenues through Ireland as unfair. "You only have to look at the falling earnings of newspapers and television companies," he explained, "to see what damage Google is having. To hear that Google is not producing any real content, while siphoning out all this money from the UK and then not paying tax is just not on."

Google's massive advertising revenues have been blamed for ravaging the finances of newspapers, broadcasters and other creative industries. The search giant is in dispute with many musicians and songwriters – including Abba's Bjorn Ulvaeus, Jools Holland and Betty Boo – for the royalties it pays for videos on its YouTube site.

The response from Mountain View was muted, with a spokesperson saying that Google could not respond to the attacks by British politicians "at this time" but insisting that the company had always acted appropriately: "Google complies fully with the tax requirements in all the countries in which we operate. In the UK and elsewhere we make a very substantial contribution to local and national taxation. In addition, we provide employment for hundreds of people in the UK and many more across Europe."

Google has previously been praised by Gordon Brown, who said in a speech at a Google conference last year, "Can I begin by congratulating Google, 10 years ago a research organisation, now a $180bn company, an expert in social innovation ... making great strides in putting services to the people of this country." Now, though, Brown is leading a crusade against tax havens, saying they should be more transparent in future, and HMRC has announced that it is to spend £1 billion on enforcement and compliance this year to cut tax avoidance and evasion by £2.4 billion.

Food for thought indeed for Google, whose (informal) corporate motto is "don't be evil"!

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